Monday, 13 February 2017

On Re-negotiating NAFTA


Most people who are following the Trump phenomenon know that big business is worried that the new Republican President will carry through on his pledges to pull the USA out of the various “free trade” agreements and put forth alternatives which will “bring the good jobs back to America.” The Globe and Mail reflects this concern through its editorials and its stable of men committed to the neoliberal program, enhanced in recent years by opinion pieces contributed by propagandists from the many right wing “Think Tanks” based at Canada’s universities.

A recent piece by Ian McGugan is typical. “...trade is a mutual exchange in which countries buy from one another and invest in one another...this back-and-forth usually works to both parties’ benefit because it allows each country to specialize in what it does most profitably.” Oh?




Who does the trading and why.

Historically, trade began as a democratic process in horticultural societies. People came together to exchange their surplus goods for goods that were in short supply. I was fortunate to observe one of these markets in rural Chiapas one day while travelling in Mexico. Once a week there was a community market where individuals (usually women) came, spread a blanket on the ground and laid out their agricultural products and crafts. They bargained with buyers on a price, usually based on labour time. The products had a use value for buyers.

I also saw this in a public market in San Cristobal which I visited with local friends. On several tables a woman from an indigenous community had stacked the clothes that she had created. The needlework was amazing. Her daughter, around 10 years old, was explaining how a price was set for the various items. It was based on the labour time needed by her mother to create the individual item. The labour theory of value.

The mercantile system.

This democratic trade was replaced in Europe during the feudal era by professional merchants who had a different value system: maximizing profit by buying cheap and selling dear. Slowly this form of trade came to challenge the feudal system.

Merchant trade was radically changed by the creation of the territorial states with absolute monarchs and a class system founded on a landed aristocracy. Trade was controlled by the ruling classes and state-created monopoly corporations like the Hudson Bay Company. State military power became an important factor in this new system of trade. Historians hold that the mercantile system lasted from around 1500 to 1750.

A key factor was the development of European imperialism and colonialism. “Trade” under this structure was more like military pillage. Slavery was introduced on a large scale. Europeans began moving to areas of the world where the indigenous peoples had been forcibly removed from their land and resources.

The new liberal political economy. 

A new class with wealth was developing under mercantilism, a capitalist class which demanded the end to the old order and the freedom to invest and trade anywhere in the world. John Locke is often cited as the founder of liberalism. But what he did was put together a unified political position based on demands by the new capitalist class.

Locke was primarily concerned with justifying the seizure of land and resources from indigenous communities. He supported slavery, was a partner in the New Royal African Company, which was engaged in the slave trade, and invested in sugar plantations in Barbados, which depended on slavery for productive labour.

The early liberals like Locke argued that the only reason for government to exist was to defend private property rights. Citizenship and any role in parliament should be limited to men who owned private productive property. 

When the new ruling class of capitalists took power, they fiercely supported colonialism and imperialism through the 19th century and the first half of the 20th century. Trade under such a system could not be anything but unequal.

The orthodox view of trade today continues to follow the model set forth by David Ricardo in his Principles of Political Economy (1817). Free trade benefits all. Every country has a relative comparative advantage. Great Britain should emphasize manufacturing. Portugal should give up on manufacturing and concentrate on making wine. How did that turn out? 

Karl Marx once asked: Cuba today is a sugar plantation. When did the Cubans decide that this was their international comparative advantage? In fact, the Cuban indigenous populations were all killed or fled to other areas around the Caribbean. They were replaced by Spanish immigrants and African slaves.

The real world of trade is quite different from that described in the current economics text books.  Governments establish policies to try to regulate trade. But it is the large corporations and the major financial interests who direct the policies and who do the trade in goods, services and control the capital flows. Different social and economic classes have different political views on trade and trade policy. This all became very evident in the debate surrounding the Canada-US Free Trade Agreement and the North American Free Trade Agreement.

John W. Warnock is retired from teaching political economy and sociology at the University of Regina. He is author of Free Trade and the New Right Agenda (1988) and The Other Mexico: The North American Triangle Completed (1995).



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